Offshore Outsourcing of Services as a Catalyst of Economic Development: The Case of India

Rapid advances in Information and Communications Technology over the last decade have introduced an element of tradability into a wide range of services that were hitherto tied to the geographical location of the consumer. As a result, a growing number of organizations are choosing to concentrate on their core activities by outsourcing an array of ancillary services to other organizations that can deliver them more efficiently and at a lower cost. Others are taking advantage of falling international telecom rates to set up units in developing countries, which offer lower labor costs or larger pools of skilled workers, leading to the phenomenon of offshored services. Typically, offshored services include customer contact centers, data entry operations, telemarketing, and basic technical support at the lower end of the spectrum; processing of financial transactions such as credit card billing, insurance claims, and debt collection in the middle of the spectrum; and professional services such as design and engineering, R&D, investment analysis, medical diagnostics at the higher end. The fact that these services include discrete business processes and rely heavily on information technology has given rise to the sometimes overlapping terminology of IT-enabled services (ITES) and Business Process Outsourcing (BPO). There is a growing body of evidence to support the view that despite the hardship faced by individuals who become unemployed when their work is outsourced, at the macroeconomic level, offshore outsourcing remains a win-win proposition for host as well as client countries.